A final federal rule requiring health insurers to reveal and explain double-digit premium rate hikes managed to disappoint both the insurance industry and consumer advocates.

The regulation HHS released last week under the federal healthcare reform law makes health plans undergo rate reviews this year when they propose rate increases on individual and small group markets of 10% or more. This trigger means states will conduct a review of the rate to see if it's excessive. If states don't have the capacity to conduct these reviews, HHS will do them.

The requirement starts Sept. 1, pushed back from an original effective date of July 1 that was included in the proposed rule published in December 2010.

America's Health Insurance Plans, the main lobbying group for insurers, had requested more time to prepare. Insurers must also step up their transparency efforts by giving members easy-to-understand information about the reasons for rate changes, posting these explanations on their websites and forwarding them to HHS to also publish online. AHIP had asked HHS to jettison the 10% increase trigger, arguing that it doesn't take into account regional market variations, medical cost drivers and other factors. Starting Sept. 1, 2012, decisions about what will trigger a rate review will be determined on the state level in coordination with HHS, according to the final rule.

In a statement, Karen Ignagni, AHIP president and CEO, said the trigger is misleading. "An arbitrary threshold for review will establish a de facto presumption of unreasonableness in what should be an objective, actuarially based evaluation," she said.

In the meantime, some consumer advocates said the rule does not go far enough to curb excessive rate hikes or adequately inform the public about why they happen.

"The health reform law relies on public disclosure of unreasonable rates to shame insurance companies into charging consumers fairer prices, but that's an empty threat if health insurers don't have to explain every assumption in the full light of day," Carmen Balber, Washington director for advocacy group Consumer Watchdog, said in a statement.

The final rule does include a requirement that each state give the public the opportunity to weigh in when a rate review is triggered.

It's unclear in how many states HHS will intervene in this rate review process.

The agency has awarded 43 states and the District of Columbia $44 million to beef up their rate review efforts, and a total of $250 million was allocated for this purpose in the reform law. Today, just 26 states and the District of Columbia have the authority to reject rate changes. Eighteen states have said they will use the grant money to push for legislation to boost regulators' authority to reject rate hikes.

But Oklahoma, for one, this month returned its $1 million federal grant to improve rate review, as part of the new governor's opposition to the reform law.

Steve Larsen, director of HHS' Center for Consumer Information and Insurance Oversight, said on a call with reporters last week that the agency fully expects "a significant majority of states will be conducting reviews."